The Act Where an Owner of an Option Buys or Sells

question 43

Multiple Choice

The act where an owner of an option buys or sells the underlying asset,as is his right,is called ________ the option.

• A)striking
• B)exercising
• C)opening
• D)splitting
• E)strangling

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Definitions:

Normal Profit

The profit level that allows a business to cover its costs, including the opportunity cost of capital, without making an economic profit.

Economic Cost

The total cost of choosing one action over another, including both explicit costs (direct payments) and implicit costs (opportunity costs).

Uninsurable Risks

Risks that are too unpredictable or certain to occur, making it impossible for insurance companies to accurately price or offer coverage.

Nominal Rate of Interest

The rate of interest before adjustments for inflation, reflecting the market rate at which money can be borrowed.